Bootstrapping an investment bank to $100M+ deal volume

Einar Vollset was an academic with a PhD in Computer Science. Then, he started a YC-backed company, exited, and "fell into" the M&A space. Now, he's the cofounder of TinySeed and founding partner of Discretion Capital, which does $100M+ in deal volume.

Here's Einar on how he got here. 👇

Falling into it

I have a PhD in Computer Science and I was a professor at Cornell for a couple of years. Then, I sort of just fell into this lifestyle, honestly.

I sold a previous business in 2015-16 and then got pulled into doing technical due diligence work for old-school PE firms. One time, I was out to dinner with one of those clients, and someone said, "You know we pay for deal flow." I had no idea what that meant, so he explained, "You know, if you introduce us to someone we end up buying, we'll give you a cut." I now realize this is what buy-side brokers do.

So, I did that a couple of times, and one ended up closing.

Right around then, the larger PE firms started moving down market in the B2B SaaS space — before 2010 or so it was rare for PE to buy SaaS businesses with less than $10M ARR, but they started buying as low as $1M. So, lots of founders that I knew (directly or indirectly) started getting cold inbound offers from PE to sell their business, and I ended up being the go-to guy for advice.

Initially, I'd just give founders my opinion — good offer, crap offer, terrible firm, etc. Then, one time I was chatting with someone and I explained that not only was the offer likely 1-2x lower than what he could get, the PE firm that had made the was notorious for firing all domestic staff and milking profits. He then said, "Okay, thanks. Hey, could you help me find a better offer?"

So I thought, "Yeah, I probably could." And here we are.

Discretion and TinySeed

These days, I'm mostly working on:

• Discretion Capital — a bootstrapped investment bank

• TinySeed — a fund for mostly bootstrapped founders

When getting started on Discretion, I didn't want to hire a bunch of MBAs, and I couldn't afford PitchBook or other databases of deals and portfolios. So, I built a set of scrapers to keep track of approximately all the PE firms in the world and their portfolios.

Our internal systems are quite a bit more sophisticated now, with AI and things, but the core idea remains: We keep track of who owns what, when they bought it, etc.

Bigger deals

Discretion charges a success fee — a percent of the transaction price. That makes revenue highly variable.

And we grow our revenue by serving more and larger clients. We started out focusing on companies with $1-10M ARR. Now, we say we do $2-20M ARR, but we'll probably have to bump up that top number a bit this year.

Client growth has been via word of mouth. Once you add 300% to someone's initial offer, word gets out.

The last few years, we've done well above $100M in transaction volume yearly.

Educating the market

The biggest challenge is educating founders — particularly technical founders, which make up about 95% of our clients. They're often pretty suspicious of "investment bankers" — or "investment wankers" as one English client memorably referred to us initially.

They often feel like, "Hey, this is something I could just do myself and save the fee." Which is true. They can do it themselves and save the fee. But the problem is that with the market being so opaque and sellers (usually) only ever selling a business once, it's extremely hard to get top dollar if you DIY.

It doesn't feel fair, but that's just the truth.

A technical advantage

Being very technical and not your usual "investment wanker" has been a huge plus for us.

Often, the junior guys tasked with actually doing the work for the kinds of banks we compete with — at least on the upper end of our ARR range — are not very technical and quite often a bit resentful they've been put on such a "small" deal.

Don't be anti-sales

My advice is simple: Don't be anti-sales. And don't be anti-selling-to-enterprises.

It's an incredibly valuable thing to ask yourself, "What can I build that someone would pay $500 (or $5000) a month for?"

What's next?

My goal for the future is to flyfish more.

You can check out discretioncapital.com, email me at [email protected], or watch me argue for fun as @einarvollset on the Twitters.